Illumina (ILMN) Traded In The Red Yesterday And Is In Tight Support/Resistance Range

Illumina (NasdaqNM: ILMN) closed yesterday at $41.73. So far the stock has hit a 52-week low of $18.82 and 52-week high of $44.07. Illumina stock has been showing support around 40.70 and resistance in the 42.34 range. Technical indicators for the stock are Bullish and S&P gives ILMN a positive 4 STAR (out of 5) buy rating. ILMN appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a Dec '09 40 covered call (IQA LH) for a net debit in the $38.23 area. That is also the break even stock price for this trade. This covered call has a 57 day duration, provides 8.39% downside protection and a 4.63% assigned return rate for a 29.65% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the ILMN Jan '11 20 Call (ZYC AD) and selling the Dec '09 40 call (IQA LH) for a $19.20 debit. The trade has a 57 day life and would provide 6.06% downside protection and a 4.17% assigned return rate for a 27.00% annualized return rate (for comparison purposes only). Illumina does not pay dividends at this time.

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